Operational Risk Management Essay Sample
consider the following:
1. A source of operational risk and one method that you would recommend to reduce operational risk in your store.
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2.Tell her about some of the sources of project risk that you might face in the store that you manage.
3. Explain one of the tools of techniques that you could use to manage project risk in your store. In your response, you should explain the technique and why it would be useful
Operational Risk Management
Operational risk involves the risk a company faces as it conducts its basic daily operations. Examples of this would be an associate does not pay attention to the discount pricing of a clothing item, causing twenty customers to be undercharged for the item and the company losing revenue. Or a refrigerator at an upscale restaurant fails causing the spoilage of over $2,000 worth of food. Operational risk is different than the other types of risks we have discussed thus far as it is not managing the unknown, but being able to hand the established processes of the company.Operational Risk Management Essay Sample
Operational risk can easily be summed up as human risk or risk of human error. It is the risk of any business operation breaking down due to human error. Each industry varies so it is important to consider the daily operational risks that could occur before making a potential investment decision. Companies that typically have lower human interactions have lower operational risks.
Causes of operational risk include a lack of well-established procedures, a poorly trained workforce, incompetence of the employee, inattention of an employee, and poorly maintained or obsolete equipment or software. A good example of this would be if a manufacturing firm chooses to not staff a qualified mechanic and rely on a third party instead. This impacts a system’s operation and causes additional time delays.Operational Risk Management Essay Sample
Project Risk Management
Project risk management involves, obviously, any project a company undertakes. The best way to handle project risk is to maintain quality management practice through the use of planning, monitoring a team’s performance, clear communication, and treating employees and workers justly. When working on projects, no matter how big or small, it is likely something will go wrong, if not everything! Having the best people carry out the plan does not guarantee project success. Numerous external factors can play a role in changing the outcome of the project and making it successful or not.
Project risks, like other risks we have discussed in this course, can be mitigated and prevented if proper procedures are followed and put into place. Sources of issues for projects include organizational problems. Some employees are borrowed out for the project and find themselves torn between multiple managers and multiple responsibilities. I worked in an office once where every time my department needed extra help on a project we would borrow personnel from other departments. It never failed an hour or two in and all those individuals went back to their work, leaving me to finish the project on my own. Projects that should only take a day or two ended up taking a week or more to complete. Poor management of needs and requirements involves poor planning of resources and time required to successfully complete the project.Operational Risk Management Essay Sample
In order to manage project risk, the project manager should go back to the fundamental risk management process – identify risks, undertake qualitative and quantitative risk impact analyses, establish risk-handling strategies, and carefully monitor those risks. Many project risks are known from the beginning, and this helps to differentiate this type of risk from other risks we have discussed in the class. Establishing a reward system to motivate employees, or developing a personal touch approach can assist in creating project commitment. In other words, had my department manager from the previous example bought the other employees lunch for the day, I might have had more help for a longer period of time. Assuming that all employees will work efficiently and effectively on a project simply because they are asked to do it, is juvenile and can lead your project into ruin.
According to Rejda (2010), “The fundamental difference between projects and processes has important risk management implications. On projects, risks are rooted in ignorance of what is in store for us.” How does that summarize the entire eight weeks of the course? I think pretty well actually. Throughout this course, you all have gained the skills to identify, define, and explain risk situations and are able to develop management concepts, techniques, and processes. In addition, you all have shown that you understand the company’s perspective the impact of safety and compliance policies have on the company as a whole.
We spent a few weeks discussing the insurance perspective in retail and developing your skills in interpreting the impact that unresolved risk management issues can have on compliance, safety, and the bottom line. Risk management is about using adequate insurance and developing policies to assist in mitigating risk.
As you complete your final week here in this course I would like you all to reflect on each week’s topic discussed. Go back over your forums and read your initial responses. Would your response be the same now as it was back then? How has gaining a full overview of risk management aided you in your daily work routine? I wish you all the best of luck as you wrap up this course and any other course you might be working on and look forward to reviewing your final papers.Operational Risk Management Essay Sample
Sources and Managing
II. Operational Risk Management
– Several ways that the processes a person carries out when conducting their business can go wrong.
A. Some sources of Operational Risk
1. Lack of well-established procedures – a lack of formal procedures set in place to assist the business grow and mature.
2. Poorly trained workforce – employees can make very critical errors. For example, not calculating totals at the register properly costing the company money.
3. Incompetence – “the incompetent person is one who is regularly unable to achieve reasonable goals that are part of his or her work” (Frame, 2003, p. 208). For example, a parking attendant who regularly damages cars or a night guard sleeping on the job.
4. Inattention – three sources of inattention are distraction, tedium, and fatigue.These three inattention characters cause employees to lose focus while carrying out operational tasks.
5. Poorly maintained or obsolete equipment and software
B. Some Tools and techniques for managing operational risk
1. Quality Control Charts – a principal tool used by quality managers to identify non-conformance to certain specifications.
2. Flowcharts – used by quality managers to identify quality problems in the process, for example, the fulfillment process in a small company.
3. Fishbone Diagrams – also known as cause-and-effect diagrams, are used to identify a certain state of affairs (production delays, etc) “and then to examine the conditions that contribute to it” (Frame, 2003, p. 225).
*It is important to note that operational risk differs from other types of risk because it is rooted in ongoing processes. Business risk and project risk are concerned with a future state of affairs.Operational Risk Management Essay Sample
I. Project Risk Management
A. Sources of problems on projects
1. Organizational Sources of Problems
2. Poor Management of Needs and Requirements
3. Poor Planning and Control – when compared to the other two sources of problems, planning and control is the most tractable.
B. Managing Project Risk
1. Go back to our fundamental risk management process – identify risks, undertake qualitative and quantitative risk impact analyses, establish risk-handling strategies, and carefully monitor those risks.
2. Many project risks are known. This differentiates the risk from other risks in our class.
3. Importance of creating project commitment – Establish a reward system to motivate employees – Develop a personal touch approach that could include showing personal interest in the project and constant evaluation of performance and feedback
**The best way to handle project risks is to maintain good management practice. Plan well, monitor your team’s performance regularly, use clear communication, and treat your employees and workers with respect. Operational Risk Management Essay Sample